Rural Housing Blog

Shortages of affordable, low-income housing are reaching crisis proportions in some parts of the U.S.

Plantation Apartments in Richmond Hill, Ga. New York finance firm Greystone & Co. has teamed up with federal and state agencies in Georgia to preserve 1,310 low-income rental apartments built in the 1970s and 1980s by the Agriculture Department for rural households.

New York housing-finance firm Greystone & Co. has teamed up with federal and state agencies in a $168.6 million effort to preserve and recapitalize 1,310 low-income rental apartments in Georgia.

The units, developed and managed by Atlanta-based Hallmark Cos., were built in the 1970s and 1980s through a U.S. Agriculture Department program targeting rural households. Tenants, who are required to meet income-eligibility requirements, pay about $400 to $500 a month in rent.

The portfolio includes 26 properties in 17 counties. Like tens of thousands of other properties developed under federal housing programs, the Georgia homes are badly in need of repair.

The deal, known as a recapitalization, provided funds for upgrades worth an average of $37,000 per unit, including such improvements as new appliances, counters, cabinets and electrical systems. The recapitalization also involved a sale of the properties and a refinancing of the debt on the portfolio. Through those actions, enough surplus capital is being raised to pay for the improvements.

“Unless you do something creative, they really have no chance of being preserved,” said Tanya Eastwood, president of Greystone’s affordable-housing redevelopment unit.

The sellers of the properties were the limited partners who decades ago provided equity financing to Hallmark for their development, mostly in exchange for tax credits. The new owner is a venture of Hallmark and new equity investors who also are getting returns primarily in the form of low-income-housing tax credits.

The units are being preserved at a time when shortages of affordable and low-income housing are reaching crisis proportions in some parts of the country. According to a recent report by the National Low Income Housing Coalition, the U.S. has a shortage of more than 7.2 million units for “extremely low income” renter households.

Hundreds of thousands of units are at risk of becoming unusable, housing advocates say. “There’s obviously a great need for more affordable housing, but we also can’t afford to lose any of the existing,” Ms. Eastwood said. The program in Georgia “allows us to prevent the crisis from getting worse.”

Much of the financing for the Georgia effort is coming from a combination of government housing and low-income assistance programs including the sale of $54.3 million in “private activity” bonds. The tax exemption on those bonds wound up on the chopping block during the debate over tax overhaul last year, but housing advocates and others were able to save them.

Meantime, about $28 million of debt financing is being provided through programs run by the Rural Housing Service, an arm of the Agriculture Department that dates back to the Farmers Home Administration, which has its roots in the Great Depression.

The Georgia units now being recapitalized were developed under the Section 515 rural-housing program, which was launched in 1962 originally to create low-rent housing for people over 62 years old.

Today, Section 515 properties are available for low-income families and individuals as well as people with disabilities, according to an Agriculture Department spokeswoman.

Since the program launched, 18,426 properties with 563,936 units were created. As of March 31, there were 13,357 properties with 407,826 units in the department’s portfolio, the spokeswoman said.

No new properties were created in 2017, and no new properties are scheduled to be created this year, she said.

Founded in 1988, Greystone is a real-estate lending, investment and advisory firm that is involved with a wide range of housing. The company originated $9.5 billion in commercial real-estate loans in 2017 and has a loan-servicing portfolio of $30 billion.

Greystone has done about 20 deals that have recapitalized and upgraded more than 12,000 low-income-housing units with the same basic structure as the Georgia deal.

“We kind of built a factory,” said Ms. Eastwood.

Hallmark is an owner and manager of about 11,000 affordable-housing units, mostly in the southeast U.S.

ABOVE: Edgar and Naomi Bermudez shuffle rock that will be used for the foundation of their new home in Wasco.

Dozens of families in Wasco are building new homes for each other, taking part in a program funded through the U.S. Department of Agriculture and guided by the nonprofit, Self Help Enterprises.

The new homeowners don’t need a dollar for a down payment. Instead, they are required to do 40 hours of work on the home every week. The development in Wasco consists of 33 homes, with 10-12 in each of three waves.

FULL STORY: Seven families in Southern Utah are anxious to get started on what will be their new homes. A groundbreaking ceremony in LaVerkin last Wednesday turned over shovels of dirt, that will soon become a foundation. Four of the new homes will be built in LaVerkin and the other three in Toquerville.

The families are part of Self-Help Homes. They all received low interest loans from the government to build each others homes. The program is growing in Southern Utah as word continues to get out.

Support Adequate Funding for USDA Rural Housing Service in the FY19 Budget
DEADLINE: March 12, 2018

Dear Colleague,
Please join Representatives Sean Duffy and Jim Costa in sending the following letter to the House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies to respectfully request adequate funding for United States Department of Agriculture (USDA) Rural Housing and water sewer programs.

For example Section 502 Direct Loan Program, which has helped more than 2.1 million families realize the American Dream and build their wealth by more than $40 billion, is the only federal homeownership program that exclusively targets low- and very-low income rural families. The program provides essential funding to fill in the gap in the private market, allowing families who would otherwise be unable to access affordable mortgage credit achieve homeownership.

The Section 523 Mutual Self-Help Housing program is another critical component of USDA’s Rural Housing initiatives. Self-Help Housing, which celebrated its 50 year anniversary and 50,000th family served in 2015, is the only federal program that combines “sweat equity” homeownership opportunities with technical assistance and affordable loans for some of America’s neediest rural families.

Rural water –sewer loans and grants are essential for building communities.

Our rural communities are in dire need of affordable, livable housing. Please join us in supporting rural districts all over the country by signing this letter.
Please contact Ryan McCormack in Rep. Duffy’s office (Ryan.McCormack@mail.house.gov) or Ben Goldeen in Rep. Costa’s office (Ben.Goldeen@mail.house.gov) if you would like to sign or have further questions.

Support Adequate Funding for USDA Rural Housing Service in the FY19 Budget

DEADLINE: March 12, 2018

Dear Colleague,

Please join Representatives Sean Duffy and Jim Costa in sending the following letter to the House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies to respectfully request adequate funding for United States Department of Agriculture (USDA) Rural Housing and water sewer programs.

For example Section 502 Direct Loan Program, which has helped more than 2.1 million families realize the American Dream and build their wealth by more than $40 billion, is the only federal homeownership program that exclusively targets low- and very-low income rural families. The program provides essential funding to fill in the gap in the private market, allowing families who would otherwise be unable to access affordable mortgage credit achieve homeownership.

The Section 523 Mutual Self-Help Housing program is another critical component of USDA’s Rural Housing initiatives. Self-Help Housing, which celebrated its 50 year anniversary and 50,000th family served in 2015, is the only federal program that combines “sweat equity” homeownership opportunities with technical assistance and affordable loans for some of America’s neediest rural families.

Rural water –sewer loans and grants are essential for building communities.

Our rural communities are in dire need of affordable, livable housing. Please join us in supporting rural districts all over the country by signing this letter.

Please contact Ryan McCormack in Rep. Duffy’s office (Ryan.McCormack@mail.house.gov) or Ben Goldeen in Rep. Costa’s office (Ben.Goldeen@mail.house.gov) if you would like to sign or have further questions.

As the House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies considers the Fiscal Year 2019 (FY 19) Appropriations Bill, we write to respectfully request adequate funding for United States Department of Agriculture (USDA) Rural Housing Programs and Rural Water-Sewer program.

Access to safe, decent, and affordable housing can transform lives. Yet, due to lower incomes and higher poverty rates, far too many rural families live in housing that is too expensive, in substandard condition, or both. According to U.S. Census data, approximately, 1.5 million rural homes—or about 5.9 percent—are in substandard condition. The poverty rate for rural areas, estimated at 18.1 percent according to the Economic Research Service, is both higher and more concentrated than the urban (15.1 percent) and national (15.5 percent) poverty rates. Overall, 82 percent of high-poverty counties—or 571 of the 703 counties with at least a 20 percent poverty rate—are rural. And, 86 percent of the nation’s “persistently poor” counties are rural, as well.

Additionally, 30 percent of rural families (more than 8 million) spend more than 30 percent of their monthly gross income on housing. These households are considered “cost burdened,” and are likely to struggle to pay for other basic needs, such as health care and child care.
USDA Rural Housing homeownership and rental housing programs have a proven track record of overcoming these barriers to affordable housing in rural America. By providing low-cost loans, grants, and other related assistance, these key programs have not only helped millions of rural families improve their quality of life, but have created thousands of jobs in rural America. In 2017, RHS assisted over 130,000 rural families in improving their housing conditions through home ownership loans, home repair loans and grants and rental and farmworker housing programs and provided over 468,000 units of affordable, safe rental housing.

The 2013 Drinking Water Needs Assessment indicated a national need of $64.5 billion for small systems[3] (systems that serve 3,300 or fewer persons) in the 50 states, Puerto Rico and other U.S. Territories. This represents 17.4 percent of total national need and comprises some 41,000 systems (82.8 percent of all systems) and 24 percent of the population. The need of water systems in American Indians and Alaska Native villages totals $3.3 billion.

USDA’s Water and Sewer loan and grant financing program is a key component of economic development in rural America. Every water and wastewater construction dollar generates nearly $15 of private investment and adds $14 to the local property tax base. The agency boasts a portfolio of more than 18,000 active water/sewer loans, more than 19 million rural residents served, and a delinquency rate of just 0.18 percent.[1] Fiscal Year 2017, USDA funded 736 projects serving 2.3 million people in small rural communities of 10,000 people or less.

We urge the Subcommittee to support the Mutual Self-Help Program, Section 502 Direct Loans homeownership loans, rental assistance, new multi-family construction and preservation, farmworker housing as well as water sewer financing. All provide critical support to rural populations, improve rural communities and create jobs.

On November 28 and 29, the National Rural Housing Coalition (NRHC) convened for its Board of Directors Meeting and Annual Business Meeting in Washington, D.C. As a part of these meetings, NRHC invited officials from the U.S. Department of Agriculture (USDA) Rural Development (RD) Rural Housing Service (RHS), staff from the Federal Housing Finance Agency (FHFA), and facilitated a panel on issues facing the rural rental housing market.

Attendees received a legislative update from NRHC Executive Secretary Bob Rapoza. In addition, the Coalition hosted a reception on Capitol Hill, where rural housing champion Representative Jim Costa (D-CA) spoke about the importance of USDA’s housing programs for rural Americans.

USDA Presentation

Assistant to the Secretary for Rural Development Anne Hazlett joined the NRHC Board for its meeting on November 28, along with several staff members from the RHS, including Acting Administrator of RHS Rich Davis; Acting Deputy Administrator for Single Family Housing Programs Cathy Glover; Direct Loan Division Director Barry Ramsey; Deputy Administrator for Multifamily Housing Joyce Allen; Finance and Loan Analyst for Multifamily Housing Preservation and Direct Loan Division Mirna Reyes-Bible.

Ms. Hazlett shared her vision for RD and the rural housing programs going forward. Although she has only been in the Assistant to the Secretary role for six months, she is familiar with USDA from her time on the Senate Committee on Agriculture, Nutrition and Forestry. However, she stated that she is still coming up to speed on rural housing programs, but emphasized her view that “housing is not just a roof over someone’s head, it can be an anchor that brings stability.” Priorities for the Administration include infrastructure, building partnerships, and identifying innovative solutions to the challenges facing rural America.

Each member of the RHS team also presented on their particular areas of work. Ms. Glover and the Single Family Housing staff members discussed the status of the Section 502 Direct Intermediary packaging program, Mutual Self-Help rehab for both acquisition rehab and owner-occupied rehab; and updates to their electronic filing system. November 28 was Joyce Allen’s fist day as the Deputy Administrator of Multifamily Housing programs (she had previously been the Deputy Administrator of Single-Family Housing programs).

The USDA presenters also left time at the end of their session for questions and answers from the audience. This gave NRHC Board members the opportunity to seek additional information or clarification. Specifically, Ms. Hazlett was asked to address the hiring freeze, which remains in effect. She took this opportunity to emphasize the importance of innovating and evaluating. She said that they are looking at their programs to identify potential partners, like with the Section 502 Direct program. They are also evaluating how USDA RD staff in the field spend their time.

On the Rural Economic Infrastructure Grant proposal, which the Coalition has expressed opposition to, Board members had the opportunity to tell Ms. Hazlett why grouping Section 504 Grants and Housing Preservation Grants is short sighted because it will reduce the availability of predictable resources for rural housing rehabilitation and preservation. NRHC was also able to recommend increasing Section 504 grants to $15,000 per grant (double the current limit).

Reception on the Hill

On the evening of November 28, NRHC hosted a reception on the Hill in recognition of the importance of rural housing programs. This event, which was sponsored by Senator Brian Schatz (D-HI), who led the Senate appropriations sign-on letter earlier in the year, gave NRHC members a chance to engage Hill staffers about these important programs.

In addition, NRHC welcomed Representative Costa, who co-led the House Appropriations sign-on letter with Representative Sean Duffy (R-WI) in the spring. Rep. Costa, who is a champion for rural issues and rural housing programs on the Hill, discussed his appreciation for the work that NRHC member organizations do to ensure that rural families have access to safe and affordable housing.

FHFA Presentation

Shiv Rawal, a Policy Analyst with the Office of Housing and Community Investment at the FHFA, gave an update on the Duty to Serve Rule and the 2017 plan development process and status. Under the Housing and Economic Recovery Act of 2008, Fannie Mae and Freddie Mac have a Duty to Serve three underserved markets – manufactured housing, affordable housing preservation, and rural housing – in a safe and sound manner for residential properties that serve very low-, low-, and moderate-income families.

NRHC has commented on the Duty to Serve rule several times, including the proposed rule, which was issued in December 2015 and Fannie and Freddie’s proposed Underserved market plans this summer. Mr. Rawal informed attendees that FHFA has be working with the Enterprises to update their Underserved Markets Plan incorporating both public input and FHFA feedback. The plans, which should be released any day, go in to effect on January 1, 2018.

Rental Housing Panel

On November 29, NRHC hosted a panel featuring Tanya Eastwood, the President of Greystone Affordable Development, Richard Price, a Partner at NixonPeabody, and David Lipsetz, the Executive Director of the Housing Assistance Council (HAC) (click here for the presentations).

The panel also featured a review of the Coalition’s findings in the 2017 Review of Federal Rural Rental Housing Programs, Policies, and Practices. USDA rental housing is frequently the only affordable rental housing available in rural communities. The average income for tenants is $12,729 annually, many (around 44 percent) are elderly or persons with disabilities and 70.9 percent are female headed households. USDA estimates that $5.596 billion in additional funding is needed over the next 20 years to preserve USDA’s rental housing portfolio. Renovation of these developments is particularly important because USDA no longer provides loans for the financing of new rental housing developments in rural America.

Richard Price presented first, and discussed where things stand currently on the Hill and with the Administration on addressing the maturing mortgage issue. He identified several challenges facing the portfolio, including the state of Rural Development under the new Administration, and addressing issues related to processing times and the complexity of transfer applications.

Tanya Eastwood presented on Greystone’s success in preservation of Section 515 properties. In total, Greystone has purchased 269 Section 515 properties, totaling 10,500 units. The total cost of these preservation projects was $1.3 billion. Greystone’s model is a portfolio approach, where projects across a state are grouped together. This allows a developer to take the fixed cost of preservation deals and spread them across multiple projects, making the cost of a 4 percent Low-Income Housing Tax Credit (LIHTC) deal less expensive than a 9 percent deal.

Greystone recently completed a portfolio renovation deal in Florida, which involves 24 properties. This was completed with deferral of Section 515 payments. Sixty-two percent of the units receive rental assistance. After the project was completed, the rent-per-unit decreased an average of $23 a month. Ms. Eastwood emphasized that the portfolio approach not only benefits the tenants by keeping rents affordable, but also spurs economic growth and investment in rural communities, in the form of jobs as well as infrastructure advances (such as new sidewalks or bus stops).

David Lipsetz provided insight from both his experience as the Associate Administrator for Rural Housing and Community Facilities at USDA and as the new Executive Director of HAC. In particular, he highlighted the data improvements at USDA.

Other Business

If you are interested in joining NRHC or learning more about the work that we do, please review our membership page and contact audrey@rapoza.org with any questions.

Friday, November 17, 2017, the Administration released the third supplemental emergency funding request in response to Hurricanes Harvey, Irma, and Maria, as well as the California wildfires. The White House is requesting an additional $44 billion in Fiscal Year (FY) 2018 for states impacted by the storms and fires, in addition to Federal property repairs.

The Administration’s request letter, submitted by Office of Management and Budget Director Mick Mulvaney, identifies five programs/activities to fund. Those programs are traditional disaster relief provided by the Federal Emergency Management Agency (FEMA) and the Small Business Administration (SBA); emergency agricultural assistance; educational recovery fund; funding to repair or replace damaged Federal property and equipment; and the Community Development Block Grant Disaster Recovery program, focused on flood mitigation projects. The Administration does not make a request on funding for any programs administered by the U.S. Department of Agriculture (USDA).

Program

Request

FEMA and SBA

$ 25,200,000,000.00

Emergency Agriculture Assistance

$ 1,000,000,000.00

Education Recovery Fund

$ 1,200,000,000.00

Repair and Rehabilitation of Damaged Federal Property/Equipment

$ 4,600,000,000.00

CDBG – Disaster

$ 12,000,000,000.00

Total

$ 44,000,000,000.00

The Administration also requests tax relief for families in areas impacted by the wildfires in California, including non-itemized deductions for casualty losses; waiving the current-law requirement that losses exceed 10 percent of adjusted gross income; penalty-free access to retirement funds; disaster-related employment relief; earned income tax credit reporting-year flexibility; and enhancement of charitable giving incentives. These provisions are similar to the tax relief provided in Public Law 115-63, the Disaster Tax Relief and Airport and Airway Extension Act of 2017, to the areas impacted by Hurricanes Harvey, Irma, and Maria.

The letter also includes several other requests from the Administration, including the need to reauthorize and reform the National Flood Insurance Program (NFIP), suggestions of offsets, a recommendation to extend the non-defense Joint Committee mandatory sequestration resulting from the 2011 Budget Control Act (BCA), pursuant to Section 251A of the Balanced Budget and Emergency Deficit Control Act of 1985; and additional funding for the Department of Defense (including $4 billion for missile defeat and defense enhancements to counter the threat from North Korea and $1.2 billion in support of the Administration’s South Asia strategy, as well as $1.6 billion for the boarder wall).

In a separate document, the Administration outlined their suggested offsets, which total $59 billion and would largely come from extending the sequester. Many of the proposed offsets are reiterations of eliminations or reductions included in the FY 2018 budget request – which Congress has already largely rejected. Those offsets include $196 million for Rural Economic Development Grants; $25 million for direct and guaranteed business and industry loans and rural business development grants; $8 million for the Rural Energy Savings Program; and $800 million for the Special Supplemental Nutrition Program for Women, Infants, and Children.

Members of Congress are already sounding off on this request. Senate Majority Whip John Cornyn (R-TX) has called the request “wholly inadequate.” Representative John Culberson (R-TX-7), a senior House appropriator, is quoted saying that this request “would sabotage what has been an incredible response by President Trump to Hurricane Harvey up to this point,” and that this request “falls severely short of the bare minimum needed to continue repairing the damage of Hurricane Harvey in Texas in every aspect. OMB’s response to the largest housing disaster, in terms of volume and dollar amount, would be laughable if it wasn’t so serious.” In October, Cornyn and Culberson signed on to the $61 billion request submitted by Texas Governor Greg Abbott for Texas relief funding.

Puerto Rico’s advocates on the Hill, including Representative Nydia Velazquez (D-NY-7), similarly state that this request would “hinder the Puerto Rican government’s capacity to address the situation on the ground.”

Congress has already provided $51.75 billion for disaster recovery since September (P.L. 115-56 and P.L. 115-72). In the case of both of the previous supplemental requests from the Administration, Congress provided additional funding over the requested amount. It is expected that they will do the same in this instance. Congress will likely take up the supplemental after they return from the Thanksgiving recess. We will keep you posted as things move forward.

In the past month, three major hurricanes have devastated coastal communities in Texas and Florida and virtually the entire island of Puerto Rico and the U.S. Virgin Islands (USVI). Damage assessments for Texas and Florida amount to over $270 billion and details are not yet known for Puerto Rico and the USVI. By contrast, total damage in the Gulf Opportunity Zone, or GoZone, established after Hurricanes Katrina, Rita, and Wilma in 2005, totaled around $200 billion.

Hurricane Harvey made landfall near Rockport, Texas on August 24 as a Category 4 storm. Although Harvey was downgraded to a tropical storm, it resulted in an unprecedented amount of rainfall along the Texas Gulf Coast. A State of Emergency was declared on August 25, with 39 counties qualifying for individual assistance from the Federal government (FEMA-4332-DR). Of those counties, 21 are nonmetropolitan counties. Over 835,000 Texans have registered for individual assistance, totaling over $783 million, of which $572 million is for housing assistance. Over 21,000 families checked into hotels for transitional sheltering, out of 338,000 eligible families. Total damage estimates for Texas exceed $200 billion.

Less than a week after Harvey, Hurricane Irma developed in the Atlantic and struck Florida as a Category 4 storm. In Florida, a state of disaster was declared on September 10 (FEMA-4337-DR), and 48 counties were identified for individual assistance, including 14 nonmetropolitan counties. Over 1.9 million people have registered for assistance in Florida, totaling more than $668 million, of which $438 million is for housing assistance. FEMA reports that nearly 8,000 Floridian households have checked into a hotel for transitional sheltering, but that nearly 640,000 are eligible to do so. Total damage estimates from Irma, which include Florida, Puerto Rico and the USVI, exceed $50 billion.

Puerto Rico, which was also struck by Hurricane Irma, suffered catastrophic damage from Hurricane Maria on September 20. A disaster declaration was made on September 20 (FEMA-4339-DR) for 54 municipalities in Puerto Rico, including six that are nonmetropolitan.[1] The extent of damage to housing has not yet been reported, but the situation on the island is reported to be dire. As September 30, only 45 percent of the population had access to drinking water, and of the 52 waste water treatment plants, just nine were operational.

One of the challenges of recovery assistance is getting to hard to reach places – like small rural communities – to ascertain the extent of the damage. The Rural Community Assistance Partnership has had teams in the field in Texas, South Carolina, and Florida, and have conducted assessments of 200 water systems, mostly in Texas. They are now starting their work in Puerto Rico. As these assessments turn into damage estimates, the size and scale of the cost of rebuilding will be clear.

The rapid succession of such powerful hurricanes brings to memory the hurricane season of 2005, when Katrina and Rita struck the Gulf States. The total damage following those storms was $197 billion. The damage from Harvey in Texas and Irma in Florida and the Caribbean will likely be over $270 billion. The final estimate for Maria in Puerto Rico is not yet available, but it seems likely the total damage from the three storms will close to $400 billion.

After the 2005 hurricane season, the U.S. Department of Agriculture (USDA) and its Rural Housing Service (RHS) played an important role in assisting the residents of rural communities in the devastated region. It is apparent that USDA and its rural development programs will play an important role in assisting the long term recovery of the communities hit by the storms.

Already, USDA Rural Development (RD) has issued a letter to USDA homeowners impacted by natural disasters (dated September 1, 2017) in response to Hurricane Harvey.[3] The letter instructs USDA borrowers to contact RD to obtain a claims package and brief instructions on available assistance, including loans for repairs for borrowers without flood insurance, payment assistance for borrowers whose income has been reduced for the foreseeable future because of the storm, and moratoriums on payment for borrowers with excessive, non-reimbursed storm-related repair expenses.

Katrina and Rita hit the Gulf Coast in late summer 2005, and Congress passed the GoZone Act in December. Homeownership loans, home repair grants, Rental Assistance and vouchers, and water-sewer financing, as well as a number of administrative measures were all put to use in the GoZone legislation. Congress is preparing a second disaster supplemental for Puerto Rico, which will provide disaster assistance for short term. However it may be a few weeks before the dust settles and detailed damage assessments are completed, meaning that comprehensive legislative action may take a while.

Rural Housing Service and Disaster Response After Katrina and Rita

Following Hurricanes Katrina and Rita, Congress made available $120 billion in directing spending and tax incentives to the GoZone. Under P.L. 109-234, total outlays for RHS programs for the 2005 hurricanes were $63 million. The Disaster Relief and Recovery Supplemental Appropriations Act of 2008 (P.L. 110-329) provided $38 million for activities for RHS for areas impacted by Hurricanes Katrina and Rita. USDA RHS provided housing relief to residents – both for families that were current borrowers and tenants of RHS properties and those that were not – in communities impacted by the storm in the form of payment moratoriums, moratorium on initiating foreclosures under the single family guaranteed homeownership loans, loan forgiveness, loan re-amortization, and refinancing. RHS also provided temporary Rental Assistance to displaced families.

Single Family Housing

After Hurricanes Katrina and Rita, Congress provided emergency housing funding to several Federal agencies, including USDA RD, through the Emergency Supplemental Appropriations Act. By September 30, 2006, RD had obligated $179,742,190 in guaranteed homeownership loans; $80,627,941 in direct single family housing loans; $2,626,864 in home repair loans; and $15,127,127 in home repair grants.

As of October 2006, RD field offices in Mississippi and Louisiana received more than 13,000 loan and grant applications, which was significantly more than the typical demand. As an example, three offices in Mississippi typically processed just 25 applications each year, however by February 2006, they had received over 1,675 applications.

Administrative Action

USDA took several steps to assist those impacted by the hurricanes. On September 8, 2005, RHS authorized waivers for 60 days for individuals and families directly impacted by Hurricane Katrina. The waivers included:

Increasing the rural area designation to areas with populations for up to 50,000;

Relaxing the income and debt requirements for low-income applicants;

Allowing the use of in-file credit reports in lieu of residential credit reports;

Allowing field staff to disregard derogatory credit reports after the disaster, and the need to verify employment, wages, and bank deposits;

Authorizing loan approvals without appraisals;

Increasing the insurance claim check endorsement limit to $15,000, and the maximum number of days for completion of work to 180 days; and

Re-amortizing loans automatically after the moratorium period.

On September 14, 2005, RHS took further action in an unnumbered letter that increased the rural designation from 50,000 to 75,000 for impacted communities in Alabama, Louisiana, and Mississippi. RHS extended the designation for 3 years from date of disaster declaration. The designation was again extended to two more communities in Alabama on September 19, 2005.

On September 26, 2005, RHS granted all borrowers an automatic 6-month moratorium on loan payments. On November 8, 2005, RHS extended previously announced 60-day waivers to one year. On December 6, 2005, RD announced the continuation of a foreclosure moratorium on guaranteed loans in the areas impacted by the hurricanes. On February 27, 2006, the moratorium given to borrowers impacted by Hurricane Wilma was extended for another 120 days, subject to restrictions that had to be met by loan holders by March 31, 2006.

Rental Housing

RHS also adopted several policies to assist people impacted by the hurricanes though its rental housing programs. RHS identified vacant units in properties around the country financed through the multifamily housing programs and asked owners to place disaster victims into those units. RHS also allocated nearly $17 million from its appropriated Rental Assistance funding to pay for housing costs for up to six months for victims of the storms. Within a few weeks after the hurricanes, almost 8,000 people displaced by the storm had been placed into about 2,600 USDA multifamily housing units in 32 States. In total, RD placed nearly 11,000 victims into over 4,100 USDA rental units in 45 States and provided $2.6 million in emergency Rental Assistance.

Administrative Action

As with the single-family housing programs, RHS made several announcements and policy changes to assist impacted families in the weeks and months after the hurricane. On September 1, 2005, RHS authorized State directors to give temporary transfers of Rental Assistance from RHS properties made uninhabitable by the hurricanes to properties with habitable units. Displaced tenants from those properties received a Letter of Priority Entitlement, which allowed them first priority for vacant RHS units.

On September 12, 2005, RHS issued another letter that included specific guidance to State directors on the types of emergency Rental Assistance available to disaster victims, the procedures for requesting assistance, and the number of obligations available for each State, initially obligating funds for 3,000 units nationwide. RHS also asked State directors to identify available units for occupancy and report the number of disaster victims that had been placed in their states.

On September 20, 2005, RHS officials informed the State directors that additional Rental Assistance had been obligated for 7,000 units and authorized the use of multifamily property funds to cover the cost of transporting hurricane victims from shelters to RHS multifamily properties.

RHS issued another letter on January 3, 2006, informing State directors that as of January 8, 2006, the agency would no longer accept hurricane victims into RHS multifamily units on an emergency basis, and that there would be no extension to the 6-month term of emergency Rental Assistance, except in cases of hardship where a 2-month extension could be requested. RHS encouraged hurricane victims to register with FEMA or HUD for additional assistance. As of May 31, 2006, USDA provided Rental Assistance to 3,124 displaced disaster victims.

USDA extended the lease of USDA multifamily housing units to all hurricane evacuees – regardless of whether they were living in USDA-financed properties (single or multifamily) prior to the hurricane, as long as they paid rent for the unit. As of May 31, 2006, USDA leased 3,848 units to victims of Hurricanes Katrina and Rita.

Also notable, after the Hurricanes, USDA halted its practice of offering for sale to the general public its foreclosed homes, and established a new initiative of making the foreclosed homes available for lease to displaced residents of the disaster areas. According to USDA, 153 homes were offered for lease under this initiative, and 25 were eventually leased. Hurricane victims without income were eligible to receive up to 3 months of free rent, and those with income were required to pay 30 percent of their adjusted income as rent. Finally, the hurricane victims who rented USDA homes were offered the first option to purchase the homes at any time during the lease period.

***

[1] Municipalities are the equivalent entity to counties in Puerto Rico.

[2] Source for Katrina and Harvey: Damage estimates by Dr. Mark Burton and Dr. Michael Hicks, whose widely cited research model was developed by the Army Corp of Engineers. Source for Irma damage: Preliminary estimates by analysis firm, CoreLogic.

The drumbeat for a dramatic re-ordering of federal rural development policy came with the release of the Trump Administration’s so-called “Skinny Budget” for Fiscal Year (FY) 2018 in March. “Skinny” because it was short on details, the first budget of the Trump era proposed a $54 billion reduction in domestic discretionary spending with an increase of the same amount for the Pentagon. It also proposed a $30 billion increase in defense for the current fiscal year (2017), financed in part by unspecified reductions totaling $18 billion from domestic programs.

For the U.S. Department of Agriculture (USDA), a 21 percent, or $5 billion reduction was offered that included elimination of rural water/wastewater loans and grants (so much for infrastructure financing), elimination of the Rural Business-Cooperative Service and its programs, and a big reduction ( 50 percent) in Rural Development staffing.

In early May, Congress ignored most of the Trump budget request and approved the Fiscal Year 2017 appropriations bill, which included increases in direct homeownership loans, Mutual Self-Help Housing grants, and rental housing programs. Congress provided the White House some of the defense money, but nowhere near the budget request and did not cut domestic programs.

On May 23, the White House rolled out its full blown FY 2018 budget. The budget proposed a 37 percent reduction in community development programs at Department of Housing and Urban Development (HUD), Commerce, and USDA.

The budget included elimination of 24 different rural development programs. Overall in terms of Budget Authority (BA) rural development was cut by $867 million or 31 percent. Rural Business programs and the Rural Business and Cooperative Service were eliminated. Rural Utility programs fell from $8 billion to $6.2 billion, principally due to the elimination of about in rural water-sewer loans ($1 billion) and grants ($480 million). BA for housing programs dropped from $1.6 billion to $1.36 billion.

Virtually every direct rural housing loan and grant program, including Section 502 Direct, Section 504 loan and grants, Section 523 Mutual Self-Help Grants, Section 515, and Section 514/516 Farmworker Housing Loans and Grants, were zeroed out in the budget. Section 521 Rental Assistance, while not eliminated, was funded at $1.345 billion – a $60 million dollar decrease from the FY 2017 rate. Left in the wake of these proposals was a few million more here or there for loan guarantees for multifamily housing and a small increase in community facility lending.

While all this was going on, on May 11 USDA announced plans for a proposed reorganization that established an Under Secretary for Trade and Foreign Agriculture Affairs and eliminated the Under Secretary for Rural Development. The proposal stated that by eliminating the Undersecretary for Rural Development position, it would “elevate” Rural Development, claiming that the Secretary will take a direct hand in Rural Development. This implausible claim came against the backdrop of the drastic funding cuts included in the Budget request.

In response, on June 11 the National Rural Housing Coalition (NRHC) released a letter to Congress signed by nearly 600 organizations opposing the Administration’s proposal to eliminate the Under Secretary for Rural Development at USDA. The letter protested the draconian cuts to rural development programs in the FY 2018 Budget request that would severely impact people from economically distressed rural communities. Signatures came from organizations located all around the country, and included community development organizations; nonprofit housing developers; state and national trade associations; farmer and agriculture cooperatives; affordable housing organizations; city governments; universities; and tribal governments.

With the stage set and NRHC at the forefront, the House and Senate Appropriations Committees began consideration of their FY 2018 Agriculture bills. Even without serious consideration of the Trump budget, FY 2018 money is tight. The caps on spending mandated by the Budget Control Act forced domestic discretionary down by about $3 billion and for good measure the House Budget Committee set the total available at $4 billion below that.

The House Appropriations Committee acted first, reporting out a bill almost $900 below the FY 2017 level, including a $350 million cut to rural development. That said, the House Agriculture Appropriations bill (H.R. 3268) did not approve any of the eliminations proposed by the Trump Administration. Some rural development programs were trimmed, but the programs and the authorities that have served rural America for some 50 years remain in place in the House Bill.

The House did follow the budget on two points. First it did not fund the Office of the Undersecretary for Rural Development. Instead the bill included about the same amount of money provided in FY 2017 for the Office of the Undersecretary for Rural Development for the Assistant to the Secretary for Rural Development. This led some to wonder: Is this reorganization proposal is a distinction without a difference?

The House bill also recommended a new grant program: the Rural Economic Infrastructure Account (REIG), which was also included in the Budget request. The REIG account pools together several existing USDA rural development grant programs into one grant program. The pooled grant programs are grants for low-income housing repair and rural housing preservation (Section 504 grants and Section 533 Housing Preservation Grant (HPG)), rural community facilities grants (including RCDI), grants for telemedicine distance learning, and grants for broadband. Any funds appropriated to those accounts would be transferred to the REIG Account, if enacted, and none of these programs received funding outside of the REIG program in the House bill.

The House bill funded this account at $122 million, with $60 million set aside for Appalachian communities. Each eligible activity under the account must receive at least 15 percent of the total provided under the Account, which, if funded at the requested level equals around $18.403 million, meaning all of the programs within the Account could face a significant decrease. For example, in FY 2017 Section 504 grants and HPG were funded together as “Rural Housing Assistance Grants” at $33.701 million.

This consolidation hits very-low income people very hard. USDA’s Section 504 Loan and Grant program and the HPG program are vital to many rural residents, particularly the elderly, who lack alternative financial resources to make basis repairs the preserve their homes. A disproportionate amount of the nation’s occupied substandard housing is located in rural areas. Most of the people affected are the poorest of the poor or the elderly, and they usually live in rural areas with incomes below the federal poverty level. Non-metro tracts are more than two times as likely to lack or have incomplete plumbing compared to metro tracts. This issue is particularly prevalent in counties that contain American Indian Reservations, and Tribal census tracts are five times more likely to lack or have incomplete plumbing when compared to metro tracts.

The Senate Appropriations Committee took a better approach to domestic discretionary spending and rural development appropriations. The Committee did not cut into domestic discretionary totals, leaving the amount available at the same level as FY 2017. As a result, the amount available to the Agriculture Bill (S. 1603) was the only about $350 million below a freeze.

This gave the Committee the fiscal space to put together a bill that set most rural development programs at the FY 2017 rate. The Senate bill is $4.2 billion above the budget request for rural development programs. This includes $1 billion above the budget request for Section 502 direct loans; $57.5 million in BA and grants for Mutual Self-Help Housing (+$30 million); additional funding for Multifamily Revitalization and $550 million for water-sewer. The Committee bill does not include the Rural Economic Infrastructure proposal – thereby freeing up funding for Section 504 grants, HPG and RCDI. The Rural Business Service and its programs are continued at the FY 2017 rate.

On the matter of the USDA Rural Development Reorganization, the Senate bill provides funding for the Assistant to the Secretary for Rural Development. However, the Committee also approved an amendment sponsored by Sen. Jon Tester (D-MT) that restored funding for the Office of Undersecretary and amended the Agriculture Department Reorganization Act to require the Secretary to nominate an Under Secretary for Rural Development who would be confirmed by Congress. The FY 2018 Agriculture Bill was reported to the Senate floor with a unanimous vote.

As we prepare this report, the House of Representatives is poised to leave Washington on Friday, July 28 for the August recess. The Senate will continue to be in session for a week or two more. Nowhere on any schedule is floor consideration of the FY 2018 Agriculture Bill.

When Members of Congress return in September, they will immediately face decisions on the debt limit, FY 2018 spending, budget reconciliation, tax reform and, possibly heath care. Congress may not take up final decisions on FY2018 bills until the late fall.

Washington has never been more uncertain but it appears that when Congressional conference committees meet to resolve differences, the choices between the House and Senate Ag bills will be relatively narrow and nothing remotely resembling the Trump Budget.

Self-Help Enterprises celebrated National Homeownership Month and NeighborWorks Week in Traver, CA on June 22, 2017. Attendees at the event included Joyce Allen, USDA Rural Development Deputy Administrator for Single Family Housing, and Gary Wolfe, NeighborWorks America Western Region Vice President. During the celebration, Self-Help Enterprises recognized over 150 youth and adults from the La Casa de Cristo Church in Scottsdale, AZ, who volunteered for four days (June 19-22) to help families in Traver build their own homes.

Under Self-Help Enterprises’ supervision, 11 families are building their own homes through the Mutual Self-Help Housing program in Traver, CA. Families are projected to move into the Traver, CA subdivision in March 2018. Working with the County, Self-Help Enterprises purchased and developed the subdivision. The County is developing plans to improve the community’s infrastructure. In addition, Family HealthCare Network has completed a health clinic facility on a nearby site.

The Mutual Self-Help Housing program is essential for rural communities like Traver, which lack new affordable housing options. Working in groups of nine to 12, Mutual Self-Help families provide over 70 percent of the construction labor on their homes, contributing at least 40 hours a week towards completion. These labor hours count as “sweat equity,” which helps to bring down the construction costs and is used as a down payment on the home.

Self-Help Enterprises, a National Rural Housing Coalition member organization, has pioneered the Mutual Self-Help Housing program. Since its founding in 1965, Self-Help Enterprises has helped more than 6,200 families in the San Joaquin Valley build their own homes.

For more information about Self-Help Enterprises, please visit their website.